There he sat, the Chairman of the Federal Reserve, Ben Bernanke, telling lawmakers in Washington what most of the rest of us have known or at least guessed at long ago.
It was as if a dark storm cloud churned by wind and ignited by electricity had somehow broke into the room and sat down on a chair before a microphone and began to speak. And, what did this cloud have to say?
“The possibility of higher energy prices, tighter credit conditions, and a still-deeper contraction in housing markets all represent significant downside risks to the outlook for growth. At the same time, upside risks to the inflation outlook have intensified lately,” the storm cloud named Bernanke said.
Let’s take what the cloud said bit by bit and see what was actually being said, shall we?
- The possibility of higher energy prices–Translation:Gas will soon be 7 bucks a gallon—-unleaded!
- Tighter credit conditions–Translation:You can just forget about that exclusive black Amex card.
- Still-deeper contraction in housing market–Translation: We will all soon be homeless.
- Significant downside risks to the outlook for growth–Translation:Brother, can you spare a dime?
Now, that is one smart storm cloud speaking.
So, will homeowners facing foreclosure get the same sort of potential help from the government to ride this storm out as Freddi Mac and Fannie Mae will likely get?
Come on–what planet are YOU living on?
Fannie Mae and Freddie Mac will be given access to cheap credit and the U.S. government (read, taxpayers) will probably gain the right to purchase shares of these two mortgage giants.
Some –like Bush–insist this is not a bailout. Yeah, and Santa doesn’t do strange things with Rudolph during all those North pole nights before Christmas.
Of course it will be a bailout if Congress goes along with this plan. You really think taxpayers won’t get stuck holding the bag, the same way they did after the Savings and Loan scandal? You might as well get your check books ready now.
Contrast that with what hurting homeowners are likely to walk away with. Some economists have already passed judgment on the proposed legislation and have said that, if passed, it would not really help many homeowners…In fact, it will probably help relatively few.
And, the storm cloud named Bernanke knows this…that is why his comments painted such a bleak picture.